Is the Economy back on track?

DSkip

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Aug 26, 2013
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This year at LSAF, we had the unique experience of dozens of buyers ready to pull the trigger on demo gear. While this is normal for shows, the past handful of years we have had guys genuinely interested but unable to load the gun. This gave me hope that our economy was starting to turn.

A few days later, I visited with a client and it appears his luxury watch business is doing quite well. I then visited my father's business where they do custom high-end jewelry work. Their job boxes are overflowing and they are about to hire another jeweler to help with the orders.

These three luxury arenas doing so well has me question whether this is just a local boom or is it on a much larger scale. Many of you are more keen than I on these topics, so I figured I would extend the question to the forum. How are the economy and luxury product markets doing these days?
 

Joe Whip

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Feb 8, 2014
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Luxury products even did well in the depths of the Great Recession. Fine jewelry is a very niche market. There will always be people with plenty of money. You need to look at business that cater to a much larger demographic to make such a finding. Also, location matters. Here in our location in the Philly burbs, the economy has been doing well since about 2010. A rather quick recovery was made. Two or three towns away, not so much. I am sure things are similar around the country.
 

Elberoth

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Dec 15, 2012
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Just waiting for the next bubble to burst. It's coming soon

+1

Wall Street deregulation is coming = another bubble on the horizion, followed by another economic crisis. Politicians didn't learn anything from 2008.
 

treitz3

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Dec 25, 2011
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Lord, I hope not. The construction industry, of which I am in, is booming to pre-'07 levels. New community lots in the Charlotte region that sat idle and in disrepair for years have already been completed and new communities are popping up with seemingly every available land grab. Better than pre-'07 levels and at a much faster rate. I have heard for years that another bubble is looming and this one will be bigger than the last BUT........but, I heard this doomsday scenario ever since I was knee high to a duck. We have only had one bad recession and it looks like the economy has recovered to the point of the America we all once knew (after Carter).

Why do folks keep saying that the economy is going to have another bubble burst? I would be interested in hearing a logical (non-political) explanation for this.

Housing prices are skyrocketing across the US due to so many Wall Street driven investment companies investing and buying up to 50-60% of available housing in certain markets across the US. They buy them to rent them out at outrageous rates and they are choking the normal US consumer of available choices for most housing that is not older than 15 years old. Older housing is usually in the clear with most of these investment companies but there are some that cater to this type of housing as the availability of newer properties start to dry up. This is (IMO) a big reason for skyrocketing housing rates in major markets and the surrounding areas and I do not foresee any of the major investors backing off any time soon. In fact, as of late, the are doubling down on investments at exponential rates.

The housing market was the main reason for the economic bubble in '07 through faulty/bad/transferred bad loans. This time, the investors are footing the original mortgage and the renters are paying the mortgage after the initial rehab. Easy to get new paying tenants this time because they do not have to sell the house due to bad loans. In theory, this would prevent another bubble burst.

Am I incorrect in my assumptions/knowledge?

Tom
 

Joe Whip

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Feb 8, 2014
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I am very tied into the housing market around the country. Unfortunately, some of the same stuff that led to the last bubble is happening again.
 

nc42acc

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Nov 10, 2015
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My business is tied to the multi family residential construction industry and is also booming at pre 08 levels. I see no downturn for at least 2 or 3 more years.
 

BlueFox

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The only bubble I see is in social media startups in Silicon Valley, mainly San Francisco. That bubble will certainly burst soon as few of these startups produce anything worthwhile. Housing prices here have gone through the roof, but that is basic supply and demand.
 

Folsom

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Oct 25, 2015
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Bud, I hear that... The amount of total idiots that somehow got into a known school and have received funding for start-up's that are almost entirely App based, is mind boggling. They are so pathetic too, the majority of them on their job listings show who the creators are whom got the venture capitol backing... what are the job listings for? Every single person that will make the company run. VC's are literally dumping money into people who are nothing more than a general idea, whom get paid handsomely to play HR.

I forget the kids name, but there was a new article a while back about some kid with an app idea that got funding for awhile, but burned through it all on paying as much as possible for offices, vacations, etc.

Housing is insanely high. The income ratio to home price ratio is absurd.
 

treitz3

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With regards to the major rental markets with investment driven properties?

Get used to it. It's becoming the norm.

Tom
 

Gregadd

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When was it off track?
This is the way it works. Boom. Bust. They keep falling for the same tricks. Now we just have a new salesman.
 

audioguy

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When was it off track?
This is the way it works. Boom. Bust. They keep falling for the same tricks. Now we just have a new salesman.

You nailed it. When have we NOT had boom followed by bust followed by boom? The depth of the bust, the height of the boom and the lengths of each vary, but they are as sure as death and taxes !!

And clearly the real estate market learned nothing. Home loans are about as easy to get now as they were before the last housing market debacle.

The definition of insanity: "Doing the same things over and expecting different results". Need we say more?
 
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DaveC

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Nov 16, 2014
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Yup, home and rental prices around Boulder or rather all towns surrounding Boulder in Boulder County have shot up like crazy and it certainly seems like a bubble. Builders are in business again at least for now, until the market busts again, which seems likely.

On the plus side the last few months have seen a LOT of business, better than the '16 holiday season, but I have no idea exactly what it's due to although I have certainly noticed buying confidence seems to follow the market.

I'd like to celebrate and think our economy is back to what it was... maybe it is in some respects but I don't have confidence in a lasting period of prosperity like many here. That's too bad as the market thrives on confidence, I don't know what it'll take to get that back. I also think we need to be thinking about how to have a prosperous economy that isn't dependent on perpetual growth.
 

Gregadd

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I was about to say at least the home market is uniquely American.
 

Joe Whip

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Having just spent nearly a month in Australia and New Zealand, we have a long way to go to approach them. Real estate there is appreciating at 30% a quarter. All that Chinese and Kirean Monty coming in, buying up homes that they don't even live in. The are just vacant. Insanity. I saw one "bungalow" in Sydney listed for $10 mill. Real estate in Queenstown, NZ, oh my.
 

Gregadd

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We have "ghostowns" in America. While prices skyrocket some monthly payments remain in reach.
 

KeithR

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May 7, 2010
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Vegas seemed to be doing quite well this past weekend.

Although I'd say the mall that is part of the Aria was a ghost town - not entirely unusual as the uber echelon brand names aren't in style with millennials and the Chinese consumer has disappeared.

Meanwhile, the line to Club Omnia was 500 deep and had 3k people inside paying $100 to see Calvin Harris. Bottle service cost $600/each that night :eek:


In audio, seems like dealers are doing quite well post-election.
 

Ron Resnick

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Jan 24, 2015
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. . . The housing market was the main reason for the economic bubble in '07 through faulty/bad/transferred bad loans. . . .

Am I incorrect in my assumptions/knowledge?

Tom

Hmmm. I think it is difficult to pinpoint clear causality. Yes, of course, the market in question at the time was the housing market. But I think there is plenty of blame to go around.

Might the bubble not have become so inflated --

-- If the federal government had not been encouraging banks to lend?

-- If investment banks had not been allowed to create balance sheets many times their equity, and to use off-balance sheet derivatives to enhance leverage further?

-- If bank lending standards had not fallen so low?

-- If the SEC had been allowed to tag banking executives with personal liability and fine individuals rather than companies (which makes the public shareholders pay for the misdeeds of the individuals)?

-- If the risk profile facing portfolio managers and bank executives had not been so asymmetric ("If I bet big and win, I get rich. If I bet big and lose the stockholders mutualize my loss.").

-- And so on . . .

(The New York Times published two articles I wrote on financial regulation during this period: "Are We Insuring Moral Hazard" and "A Better Way to Regulate." I also periodically guest lecture on this subject to an Economics Department class at UCLA.)
 

treitz3

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Dec 25, 2011
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Thanks for clarifying in a more detailed explanation Ron. Yes, those are the factors I was referring too.

From where you stand, are we headed in the same direction and/or have we changed some of the aforementioned factors that led us to the bubble in the first place?

Tom
 

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